Insurance policies often include a deadline to complete repairs. This post discusses how property owners should think about such a deadline when an insurer claims the deadline has expired, thus it will not pay depreciation (replacement cost value).
Deadlines to complete repairs vary by insurance company in part because they are not dictated by state law. As regular readers of this blog post known, some portions of an insurance policy are written by state legislators or administrators. An appraisal clause is a prime example. This is important because insurance companies may not alter uniform terms for all policies required by the state. This principle does not apply to the deadline to complete repairs in the states where I practice. The deadline to complete repairs is governed by contract law. That is the important principle to keep in mind when the insurer refuses to pay depreciation.
Insurers write the deadline to complete repairs differently. Some insurers write the deadline to require completion of all physical labor. Other insurers write the deadline so that property owners need to only notify the insurer of the property owner’s intent to complete repairs, not complete the work. Other insurers write the deadline for commencement of repairs, not completion. Every property owner and advocate should make sure they know of the actual deadline by reading it in the policy, not a summary of what the deadline might mean from an adjuster.
All principles and rules of contract law apply to a repair deadline. That includes the contract law principle that no party may enforce a contractual requirement when it has frustrated, or hindered, the other party’s ability to perform. If the insurance company was slow in adjusting the claim a property owner can argue it was the insurance company that frustrated his or her ability to do the repairs.
Property owners need the actual cash value check to commence repairs. Contractors will not commence repairs without some money in the bank. If the insurer is slow in sending the actual cash value check, or adjusting the claim, or both, the property owner can argue the deadline to complete repairs is void because the insurer has frustrated the ability to perform repairs.
Contested insurance adjustments resulting in appraisal will further slow the ability to complete repairs. In my view, state law that mandates insurance appraisal clauses allow a demand for appraisal any time within statute of limitations. As such, if appraisal is demanded one day before the statute limitations expired there is no way repairs can completed the next day. In that way, the insured property owner has the argument the repair deadline circumvents state law.
Some states endorse a one-year statute limitations for insurance claims. That is a very tight window for filing suit, especially if the suit is over the time to repair. That scenario may require some forethought in how to handle it. In this scenario best practice for the insured is to let the insurer know it intends to complete repairs, and ask the insurer to toll any deadline about to expire.
Feel free to contact me should you have any questions about a repair deadline. E-mail me at ed@beckmannlawfirm.com